Qualcomm (QCOM)

(Top Pick May 29/14, Down 9.98%) China is not as big a problem for them as people think. They have a great road map, but had trouble executing. They have a good dividend and can buy back shares. It is a great story, but there are bumps along the way.

Seems to be one of those companies that is involved in financial engineering. Had been bullish on this for a number of years, but sold his holdings recently. The last round of android phones, iPhones, are not using this company’s chips to the degree they were before. The other big problem is that China almost started reneging on their CDMA devices agreement, which is a big negative. The company announced a massive share buyback when they missed their quarterly numbers, and that bothers him.

In the long term, this is a very viable and very strong name. Have run into some issues in China, which seem to have been resolved. The semiconductor market is a high beta market, so you will see some stocks do very well, while others do not. He likes what they are doing in terms of their strategy. A lot of the mobile phones are going to be playing TV, so their Snapdragon chipset is the way to go.

A lot of companies are having trouble in China which wants to foster local industry, and are exerting a lot of pressure on companies to lower pricing. The smart phone shipment in China has now declined for the 1^st time in a long time. If we are getting to the top of a cycle, this company, being the dominant player, might be affected. Current earnings and current cash flow look very, very good. It has been a great performer, but you should be careful to see what happens in the next leg.

Stock has done okay. Had a couple of earnings disappointments in the last couple of quarters. Announced their latest earnings about 2 weeks ago

(A Top Pick April 29/14. Down 11.56%.) Thinks the China issue has been sorted out. They have a very strong technology roadmap. They are really in all the cell phone businesses, which is the real growth. Also, thinks there is really good growth coming from other parts of their business. Good dividend yield.

(A Top Pick March 31/14. Down 11% to 3%.) He got stopped out of this. At the time there was a lot of issue with the Chinese, patent rules, etc. The opportunity seems to be turning around right now.

From the middle of April right through until the end of May, high tech stocks like this have a tendency to do very, very well. Currently it is forming a nice base pattern. If it moves above that base pattern, that could set the stage for a nice little move on the upside for a seasonal trade. It could be an interesting situation over the next few weeks.

With their problems they had in China and a number of their customers not honouring the royalty and licensing agreements, the stock dropped considerably. He felt it was a little bit overdone, so when the stock moved back up into the low $70s, he exited.

Part of the reason for controversy has been China’s antitrust investigation. That is now behind them. They also had OEMs in China that were underreporting revenues, which is being resolved. However, there are some other headwinds. Their chipset business no longer has Samsung or Apple (SSPL-Q) in future iterations of the high end smart phones. To him, that is not really a huge issue, as their core business comes from the licensing business. Management has committed 75% of the free cash flow back to the shareholders through dividend increases and a $10 billion share buyback over the next 12 months. Dividend yield of 2.73%.

Still likes this. Not expensive. Trading at about 15X earnings and pays a nice 2.4% dividend. Also, doing a $10 billion buyback. Had some issues with China on their licensing deal, but that has been solved in the last little while. Revenues are really flat this year, but will actually increase nicely next year. Very integral to the whole smart phone business, which is really the growth area in many ways.

He really likes mobile data and mobile devices as a theme. This company’s difficulty right now is that they do have some challengers. They had a really dominant market share. Had some difficulty in China which felt they had an unfair monopoly. One of their challengers is a UK company, Arm Holdings (ARMH-Q), which has some very interesting technology including a low powered chip that doesn’t consume a lot of electricity. They are taking market share for sure. Another good semiconductor is Avago Technologies (AVGO-Q).

One of his favourite plays in technology. Where they are positioned in the smart phone technology, is great. Growth is slowing down a little bit, and he thinks you are going to see more of that money returned to shareholders. Thinks they are starting to settle those problems in China a little bit more, which will give a higher valuation to the stock. Still growing and trading at about 16X forward earnings.

Just exited his position at about $70. That was because of a warning on earnings by the company based on 1) their ongoing dispute with the Chinese government and Chinese licensees who weren’t paying, and 2) a major customer, Samsung, who declined to use their major LCD chip. Often times you see things overdone in the market and 1^st reactions are very, very negative. The stock dropped down into the low $60.

Hasn’t owned this for about 2 years. Had a lot of growth in the last couple of years, building not only the wireless chip that goes into every smart phone, but also the processor that goes into all the phones other than Apple (AAPL-Q). Stumbled last year because of problems in China, but have recently cleared those up. The problem is that some of the other large smart phone vendors, like Samsung (005930-KS), have designed them out of some of their premium devices. Feels the growth outlook is now more muted. Only trading at about 14 or 15 times earnings, but just doesn’t see a lot of growth.